Stocks slashed their earlier gains on Friday as investors concluded a week of wild swings. Wall Street has been grappling with fears over the coronavirus’ economic blow, fueling historic market volatility.
The Dow Jones Industrial Average traded 450 points lower, or more than 2%, after rallying more than 400 points earlier in the day. The S&P 500 slid 2.3%. The Nasdaq Composite traded 1.3% lower after jumping more than 2%.
“The markets are trading more on emotion than the actual data,” said Sal Bruno, chief investment officer at IndexIQ. “That’s what’s causing the volatility.”
“We’ve seen assets just trade off, really for no good reason, but just because there’s fear,” he said. “When we look back at this, we’ll see how much of this was information-based trading and how much was emotionally based trading.”
The market’s swings come on a “quadruple witching” options expiration day, which tend to add to market volatility. A swift reversal in crude prices Friday had a ripple effect, leading investors to sell assets in other markets. Crude traded higher earlier in the day. An order in New York state for nonessential workers to stay home raised worries about a bigger economic impact from the coronavirus.
Friday’s moves follow the major averages posting solid gains Thursday in a reprieve from the relentless selling seen in the market this week.
The Dow was down 15% for the week through Friday afternoon and was on pace for its biggest one-week fall since October 2008, when it slid 18.2%. The S&P 500 has lost more than 13% week to date after dropping another 11.5% last week. The Nasdaq has fallen 10.4%.
“I think there’s a technical rebound coming,” CNBC’s Jim Cramer said Friday. But “I don’t know how long it will last because I think people are very worried.”
Investors got whiplash this week amid the massive daily swings in both directions. The S&P 500 concluded on Thursday a record streak of eight trading days with a closing change of at least 4%. The Cboe Volatility Index (VIX), Wall Street’s preferred fear gauge, closed above 80 earlier in the week, topping its financial crisis peak.
“The volatility, there’s no reason to think it dissipates,” said JJ Kinahan, chief market strategist at TD Ameritrade. “What you really want to see is the market establishing some trading ranges.”
“Right now, I don’t think anyone can say there’s definite support or resistance because the moves have been just so big,” he said.
On Wednesday, the Dow closed below 20,000 for the first time since February 2017. Investors were hoping that was the bottom and that the stock market can recover as virus cases peak in the coming months and government stimulus kicks in. The 30-stock index remained 32% below its all-time high level from February, while the S&P 500 was 29% below its high.
The Federal Reserve announced this week a number of stimulus measures in addition to Congress’ efforts. The U.S. central bank announced Friday it is expanding its asset purchase program to include municipal bonds. These measures, however, haven’t assuaged investors’ fears.
“Market volatility will persist until the government — fiscal or monetary — provides a backstop to stressed corporates and small & medium businesses,” New York Life Investments’ Lauren Goodwin said Thursday. “Support of those functions is vital to ensuring the economic disruption of covid-19, though severe, is temporary.”
Late Thursday, California Gov. Gavin Newson announced a statewide order for sheltering in place. “Home isolation is not my preferred choice … but it is a necessary one. … This is not a permanent state, this is a moment in time,” he said.
In New York on Friday, Gov. Andrew Cuomo ordered 100% of nonessential businesses to work from home. “When I talk about the most drastic action we can take, this is the most drastic action we can take,” he told reporters.
More than 14,000 cases of COVID-19 have been confirmed in the U.S. along with over 200 deaths, according to Johns Hopkins University. Globally, more than 245,000 cases have been confirmed.
As the coronavirus spread Thursday, Bridgewater’s Ray Dalio said the outbreak will cost U.S. corporations up to $4 trillion, and “a lot of people are going to be broke.”
“What’s happening has not happened in our lifetime before. … What we have is a crisis,” the Bridgewater founder said on CNBC’s “Squawk Box.” “There will also be individuals who have very big losses. … There’s a need for the government to spend more money, a lot more money.”
— CNBC’s Yun Li and Eustance Huang contributed reporting.
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